A “Short Ship” is the known shipping of a kit without all specified items as contained in the bill of materials. While this may be necessary at times, we seek to minimize these events wherever reasonable. This policy outlines the decision making process and authorizations required when a potential Short-Ship event arises.
Our forecast and production planning processes should seek to identify any potential shortages on a timely basis. Any employee who identifies a potential shortage issue should immediately raise this to their supervisor.
All efforts should be made to prevent short ships.
Whenever a potential shortage situation is identified, follow the process outlined below.
1. Contact Procurement with the item details, quantity needed, and information on when the items are required to be in house to avoid a short-ship situation
2. Procurement will identify alternative sources for the materials needed (if any), the cost, and the timing for delivery
3. Purchasing calculates the Avoidance Cost of the request and provides it to the Operations team
The “Avoidance Cost” is the cost of avoiding the short ship and is calculated as the price differential between our standard cost for the item and the substituted cost, multiplied by the units required, plus additional shipping costs (if any).
4. Using the calculated Avoidance Cost, follow the guidance below
- An Avoidance Cost of less than $20 per kit can be approved by an assembly lead or any member of management in the Yulee facility and implemented immediately as this saving likely offsets the additional shipping and process costs of a short ship. Purchasing shall identify the next best sourcing alternative considering shipping time, cost, and any other relevant customer service considerations.
- Avoidance Costs of between $20 and $30 per kit are automatically approved for all tier 1 customers. For other tiers, the Production Manager may approve at their discretion.
- For an Avoidance Cost between $30 - $50 per kit, the VP of Operations may authorize decision the purchase, except where the total Avoidance Cost exceeds $5,000 which requires further approval from the CFO.
- The VP of Operations should consult the VP of Sales Operations to ensure customer specific issues, if any, are taken into account including the customer tier or history of service issues that may impact the decision.
- The VP of Sales operations is the alternate to the VP of Operations when the VP of Operations is unavailable.
- In the event that neither is available, and time is of the essence, the CFO may be called up to authorize the purchase.
- For amounts in excess of $50 per kit or over $5,000 in total, the CFO must authorize. The CFO shall consult with the VP of Operations and the VP of Sales Operations to consider all relevant information including customer tier, historical customer service issues (if any), and any other relevant information for consideration.
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